Family Business Magazine E-Newsletter
November 18, 2008



Contents
1.  Flexibility, creativity will be needed to transfer family businesses in 2009.
2.  Dillard's to close more stores in 2009; investors blast 'atrocious' performance.
3.  Pilgrim's Pride said to be near bankruptcy.
4.  Family bids to buy back Boscov's assets.
5.  Cuts at Seattle Times, Rodale.
6.  Preparing the family for a business transition.
7.  How your family business can improve its fiscal fitness.



1.  Flexibility, creativity will be needed to transfer family businesses in 2009.  "The aging of the Baby Boom generation, combined with today's economic uncertainty, means there will be a rising tide of owners seeking to transfer their privately held businesses in 2009," writes Joseph Bazzano, a Certified Valuation Analyst with Bloomfield, Conn.-based Private Equity Transitions LLC. "If your exit plan involves a sale of your business, here are five trends that will help you think strategically about this important step."

Read the whole article.

Return to the top.





2.  Dillard's to close more stores in 2009; investors blast 'atrocious' performance.  Dillard's Inc. announced plan to close additional stores after the December holidays in addition to the 20 it closed this year, according to a report in the Business Courier of Cincinnati. Meanwhile, Barrington Capital Group LP and Clinton Group Inc., which together own 5.7% of the company, wrote a letter to some of the company's directors demanding the ouster of CEO William Dillard II. "The performance of the company over the past 10 years has been atrocious," the letter said, according to the Business Courier. "Since Mr. Dillard was appointed CEO in May 1998, the company's market capitalization has plummeted from over $4.36 billion to less than $246 million." Corporate governance experts told the Business Courier that the investors are unable to force a change, since most of Dillard's shares are family-controlled. In an earlier letter to directors, the investors asked them to change the company's share structure.  (Source: Business Courier of Cincinnati, Nov. 7, 2008.)

Return to the top.





3.  Pilgrim's Pride said to be near bankruptcy.  Independent research firm CreditSights said in a report that there's a "high probability of a bankruptcy scenario" for Pilgrim's Pride, according to an article in the Dallas Business Journal. Lenders agreed to give the company until Nov. 26 to come into compliance with a debt covenant, the second such waiver since last September, the Wall Street Journal reported. The new waiver requires Pilgrim's Pride to hire a "chief restructuring officer," the Wall Street Journal article said. The report noted that the company had instituted change-of-control agreements with its four top executives, including Lonnie Ken Pilgrim, who along with his parents controls 62% of the company's voting power.  (Sources: Dallas Business Journal, Oct. 30, 2008; Wall Street Journal, Oct. 28, 2008.)

Return to the top.





4.  Family bids to buy back Boscov's assets.  A group led by Albert R. Boscov, 79, and brother-in-law Edwin Lakin, 85, have signed an agreement to buy back most of the assets of Boscov's Department Stores LLC and rescue it from the brink of bankruptcy, the Philadelphia Inquirer reported. A hearing to approve the sale, scheduled for Nov. 13, was postponed until today because the family's loans were not yet finalized, according to a Reuters report. Albert Boscov's father founded the company 97 years ago, the Inquirer noted. Though terms were not disclosed, the Boscov-Lakin offer reportedly included more cash than a previous offer from Versa Capital Management, which included $11 million in cash, the Inquirer article said. Reuters reported that Versa is seeking a $4 million break-up fee. A financing expert told the Inquirer that the Boscov-Lakin deal was a sign of investors' and lenders' confidence in the family. Frank Strawbridge, whose family's Strawbridge & Clothier chain was sold to May Department Stores Co., in 1996, told the Inquirer, "If any family department store business can succeed in this effort, it would be Boscov's. They're very good at what they do." (Sources: Philadelphia Inquirer, Nov. 5, 2008, Nov. 6, 2008; Reuters, Nov. 13, 2008.)

Return to the top.





5.  Cuts at Seattle Times, Rodale.  The Seattle Times Co. announced a reduction of 130 to 150 staff positions -- about 10% of the remaining work force -- seven months after a previous round of cutbacks, the Seattle Times reported. Publisher Frank Blethen and company president Carolyn Kelly wrote in a memo to staff that "As the 2009 budgeting process continues, there will be additional expense reductions, which may include additional layoffs." The memo added, "As difficult as these operating decisions are, it is important to remember we have been here for 112 years, weathering many ups and downs, and these budget actions are necessary to respond to the current economic decisions and to position our newspaper and online operations for many more years of success and community service." Meanwhile, another family-owned publisher, Rodale, announced plans to lay off 10% of its workforce, eliminating 111 jobs, according to a report in the Allentown, Pa., Morning Call.  (Sources:  Seattle Times, Nov. 3, 2008; Morning Call, Nov. 3, 2008.)

Return to the top.





6.  Preparing the family for a business transition.  "A family should view a sale, a merger or an acquisition as both transaction and transition," write family business advisers Fredda Herz Brown and Sam Davis III in Family Business Agenda, a publication of Family Business Magazine that focuses this year on mergers and acquisitions. "Taking the time to plan in advance can prepare the family emotionally and tactically," Brown and Davis write. They offer these tips for families:


For advice on preparing for the sale of your business, obtaining the maximum value for your firm and other M&A topics, see Family Business Agenda. The bonus publication is included in a subscription to the print edition of Family Business Magazine. Learn how to subscribe here.

Return to the top.



7.  How your family business can improve its fiscal fitness. In Financial Management of Your Family Company, adviser Francois de Visscher notes that attention to sound financial practices and shareholder value are what separate the best family businesses from the rest. He recommends seven sound practices to put you on your way to strong financial management:
  1. Establish effective financial and governance structures that separate family issues from business issues.
  2. Strive for cash-flow growth, not just business growth.
  3. Establish adequately funded liquidity programs for shareholders.
  4. Invest year after year in family members' satisfaction with the business, their confidence in it and their dedication to it, through family information meetings, programs to stimulate next-generation entrepreneurship and a family-wide philanthropy program.
  5. Establish arm's-length compensation policies for active family members and communicate them clearly to all shareholders.
  6. Use public company accounting standards.
  7. Make use of global financial resources. Factor global forces into your strategic planning, and consider overseas investments or acquisitions.


For more advice on managing your family firm's resources, see Financial Management of Your Family Company. Learn more about the book and see the table of contents here.

Return to the top.

Give the gift that shows you care.  A gift subscription to Family Business Magazine will deliver vital family business ownership and management advice for a full year. See here for gift subscription information.

Giving to multiple recipients?  Use our special Family Subscription rate and receive up to 10 subscriptions for one low price. See here for more information.

Is your e-mail address changing?  Unsubscribe your old address and subscribe your new one here.

Quick Links:
Financial Management of Your Family Company
The Family Business Policies & Procedures Handbook
Family Business Magazine

No longer want to receive this e-newsletter?  Unsubscribe here.